Warriors arena means millions for S.F.

Busy calendar required in Warriors' S.F. plan

Updated 10:45 pm, Friday, November 9, 2012

Estimates that San Francisco city coffers would receive almost $54 million in one-time revenue and up to $19 million a year from a new waterfront arena that the Golden State Warriors want to build are "reasonable" projections, according to an analysis released Friday.

But that money is based on having events at the multiuse arena more than half of the year, a frequency opposed by some nearby residents concerned about traffic, cleanup and crowds spilling into their neighborhood.

"Besides the actual programs themselves, there's also the staging, which means even more days," said Barbara Inaba, a neighbor. "I don't know how all of these people are going to get into this arena."

Reimbursing the Warriors for $120 million in construction costs to rebuild Piers 30-32 for the $1 billion arena project would also slice the ongoing revenue the city would see to about $14 million a year, plus there would be a 13 percent interest rate on construction costs not initially reimbursed, according to the new report by Board of Supervisors Budget and Legislative Analyst Harvey Rose.

Rose's report, though, did find the conceptual framework for the arena deal between the city and Warriors to be "fiscally feasible," an administrative hurdle that's needed on major projects before the start of a rigorous evaluation of environmental impact and negotiations on a detailed term sheet.

Rose's recommendation comes as the Board of Supervisors budget committee next week is to consider whether the city should move forward with an environmental study, which the ball club will pay for.

Jennifer Matz, Mayor Ed Lee's point person negotiating the arena deal with the Warriors, welcomed the report as a "fair and accurate analysis."

The team wants to have a San Francisco arena ready for the start of the 2017 National Basketball Association season, which is when its lease at Oracle Arena in Oakland ends. Lee has called the arena plan "my legacy project," and made it a top priority.

Fixing the piers

Under the tentative deal with San Francisco, the Warriors would fix crumbling Piers 30-32 and build the arena, related retail, a parking garage covered with public plazas, and other features. The team would also build a hotel, condominiums, retail and parking on a 2.3-acre parking lot known as Seawall Lot 330 directly across the Embarcadero from the piers.

The deal calls for the Port of San Francisco to retain ownership of the piers, and lease them to the Warriors for 66 years.

The city would be obligated to reimburse the Warriors up to $120 million for the work on the piers, money that could only come from three specific sources related to the project. Those are: rent credits of about $2 million a year for use of Piers 30-32, selling or leasing Seawall Lot 330 to the Warriors for the appraised value of $30 million, and about $60 million in bond proceeds backed by the city's share of future property taxes generated at the site for up to 30 years.

The Warriors also would be entitled to a 13 percent annual return on unreimbursed construction costs the city owed.

That means after paying off a combined $90 million of the $120 million maximum using bond proceeds and the sale of Seawall Lot 330, the city would begin accruing interest on the remaining $30 million to the tune of about $3.8 million in the first year, the report said.

That's almost double the roughly $2 million in annual rent that would be credited toward the city's side of the ledger.

Jamie Whitaker, a Rincon Hill resident and blogger concerned about the project, called that rate "criminal."

Not an unusual rate

But it is only slightly above the 11-12 percent rates for public infrastructure investments on other port property, said Severin Campbell with the budget and legislative analyst's office.

"This is common," Campbell said. "It's a standard way of looking at when a developer puts equity into a project."

The figure actually is lower than the 18.5 percent rate the city will pay Treasure Island developers and 20 percent rate at Hunters Point, Matz said.

The rationale is that the borrowing costs are higher because lenders are providing money to build infrastructure with no guarantee that the development would pay off, Matz said.

The Warriors are also assuming the risks for any cost overruns on rebuilding a pier where at least four other development plans have been scrapped since 1990.

"Anyone who suggests 13 percent is high for a project with this risk profile just simply doesn't know what they are talking about," said Jesse Blout, the Warriors' development project manager.

Exactly when the 13 percent rate would start to toll is subject to negotiation, and it may never be a factor, those involved in the deal said.

The sides are also still negotiating over whether prepaying years of rent at a discount would be the best way to cover the city's reimbursement responsibility.

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